'In a first', RBI asks fintech to track suspicious transactions in polls

Payment companies were not regulated during in 2019 election season, says senior industry executive

The Reserve Bank of India (RBI) has for the “first time” asked fintech companies, including those processing payments, to track high-value transactions during Lok Sabha election, according to a person in the know.

The regulator routinely directs banks to monitor and track suspicious transactions during elections. “It generally would apply to banks to monitor and scrutinise high-value transactions. This is probably the first time it is being sent to fintech companies such as payment ones. This is because payment companies were not regulated during the last general election season," said a senior fintech executive.

The RBI came up with a payment aggregator framework in 2020. It mandated that payment gateways must obtain an aggregator licence to acquire merchants and offer digital payment acceptance solutions.

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Razorpay, Cashfree Payments, Digio, Decentro and CCAvenue are among payment aggregators the RBI regulates.

The RBI’s directions went to all regulated entities and are in accordance with the Election Commission of India (ECI) guidelines.

“This is a general notification that the RBI sends out every election season to tighten the security of high-frequency, high-value transactions. It is done to ensure that [transactions] are not being used for any election-related purposes,” said the person quoted above.

The RBI has asked fintech companies to report suspicious transactions to the authorities as digital financial services rapidly expand in the country.

Unified Payment Interface (UPI) transactions grew a record 57 per cent in volume and 44 per cent in value in Financial Year 2023-24 (FY24), compared to FY23.

In March 2024, UPI transactions saw a 55 per cent rise in volume to 13.44 billion and a 40 per cent rise in value to Rs 19.78 trillion compared to March 2023.

March 2024 was the first time that UPI transactions crossed 100 billion and closed at 131 billion in a financial year, compared to 84 billion in FY23.